Oil Slides to Seven-Month Low on High Inventories

United States petrol inventories rose by 2.1 million barrels last week, while crude oil inventories fell by only 1.7 million barrels, compared with forecasts of 2.7 million barrels, the EIA said.

Oil prices fell 3.5 per cent after U.S. petrol inventories jumped and there was a lower-than-expected drop in crude stockpiles. "It's really counter to what we should be seeing this time of year".

The International Energy Agency had earlier warned that rising oil production led by resurgent USA frackers would outstrip global demand growth next year, threatening Opec's efforts to curb global supplies.

That means an entrenched market glut that has kept a firm lid on oil prices is likely to persist, despite disciplined efforts by most OPEC producers to rein in their own output. Output at major American shale fields will reach a record in July, according to the EIA.


Opec and 11 rival exporters including Russian Federation have agreed to extend a deal to limit supply by 1.8 million bpd to March 2018, in order to cut global inventory levels.

US crude futures fell by 1% to trade at $45.97 a barrel after the report was released. The global benchmark crude traded at a premium of US$2.07 to August WTI.

Refinery crude runs also rose 29,000 bpd and utilization rates rose 0.3 percentage point to 94.4 percent of total capacity.

Front-month gasoline futures declined 4.5 per cent to settle at US$1.4327 a gallon, the lowest since late November. "The gasoline build was negative as well and that's one of the things the market has been watching", Nick Holmes, director at Tortoise Capital Advisors LLC in Leawood Kansas, which manages US$16 billion in energy-related assets, said by telephone.


Gasoline inventories now sit at 242.4 million bbl, or 9%, above the five-year average of 223 million bbl, according to EIA data. "Obviously again, disappointing crude draw today relative to the market consensus".

Leading players such as Saudi Arabia and Russian Federation have pledged to do "whatever it takes" to stabilize the market, and the oil revenues their economies depend on. The IEA expects US crude production to grow by 780,000 barrels per day next year.

Brent crude futures extended losses after the report, falling 64 cents on the day to $48.08 a barrel by 0804 GMT, from around $48.26 prior to the release.



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